Cantor Morning News | Tech/Media/Telco

US futures marginally lower following a fairly lackluster European session as investors await the ever elusive Greek deal. Although another deadline passed without an agreement it appears that the only sticking point related to pension adjustments - recent headlines also pointing to Greek PM asking for revision of 2014 budget targets which could further derail the talks. Despite all the uncertainty investors are still considering the deal done with markets hanging in despite the latest missed deadline. Bank of England leaving interest rates unchanged as expected (ECB decision to follow) and pumping $79B more stimulus into the economy. Initial jobless claims lead the US economic news today. Euro relatively unchanged at $1.325 while yields better on the margin ex Spain +7 - France -1, Italy -1, and Portugal -19.

In TMT, CSCO came in largely as expected with a slight beat and numbers moving up marginally post the results. The one exception was book to bill was just 1 and deferred revenues were flat Q/Q. Other than that a decent print and guide but commentary and Chambers tone probably a little less bullish than expected by investors and orders seeing a bit of deceleration. As we expected, Tier 1 service provider didn’t really show the weakness (and was the best performing sector order wise) with orders up 12% Y/Y (derivatives JNPR, CIEN, ALU, ADTN, APKT, SONS, TLAB). CSCO has been taking share from JNPR and that’s what’s helping the outperformance. Enterprise orders were up 7% (FFIV, RVBD, ARUN, NTGR, PLCM) highlighted by strength in video, collaboration. Along with order declines from France, Germany and India, end market weakness came from public sector down 1% Y/Y showing the rapid deterioration in that segment similar to what IT Services firms have been indicating in terms of fed spend – DELL, CSC, SAI, BAH, UIS. Inventory flat Q/Q – derivatives CAVM, BRCM, XLNX, ALTR, CY. Net-net, Street earnings go to $1.90+ for CY12 from $1.86 – stock probably settles in the $19-20 range – earnings as expected not a big catalyst in either direction.

On another note, ATML guided down Q1 below seasonal to 6-11% Q/Q implying $341-361M (vs. official Street $387M but buyside much lower post the preannounce). Don’t think guide is a big shocker given the preannouncement and CY comments on their earnings (Street modeling 15% Q/Q decline for March). The tablet and wireless sectors have been going through an inventory correction which is towards the end. Going forward, management made the “bottoming comments” which have become commonplace now in semis land suggesting that bookings in January 25% higher than October. We continue to have a positive view on the stock on new design wins with Maxtouch launching in Q2/Q3, Windows 8 product cycle, inventory restock in smartphone and tablet touch and solid microcontrollers business which continues to gain share. Peak earnings on the last cycle $.90 cents we think $.90-1.00 possible as this new cycle starts to take off. We think investors should be adding to positions at these levels playing for better fundamentals going forward.

In Asia overnight, Quanta and Wistron showed M/M drops in January as expected – Quanta down 14% while Wistron down 22%. Companies expecting January to be the bottom with sequential growth resuming in February and March. Lenovo solid Q4 results $8.4B vs. Street $7.73B – derivatives DELL, HPQ, STX, WDC, NVDA, MRVL, LSI, AMD, INTC, MU. NVDA expected to benefit from HTC orders for Tegra 3 taking share from QCOM– Digitimes. AUO expects the business to gradually improve in 2012 quarter by quarter with demand expected to outstrip supply – expecting panel growth of 14% Y/Y (seems a little high relative to LPL and GLW) while supply increases 8% - derivatives LPL, GLW, Asahi, NEG.

Macro/Technicals

Leaders: GUID +34.15%, MOTR +33.85%, CSC +18.54%, RMBS +9.14%
Laggards: SGI -22.62%, GIGM -11.76%, RICK -7.79%, GLBC -6.40%

Active Names

Enterprise/Service/SW: INTU, CA, PAYX, ORCL, MSFT, IN, INTU, SYMC, VRSN
PCs/Devices/Net: DELL, YHOO, HPQ, OPWV, ANGI, EDGR

Semis/Circuits/Storage: AMAT, STX BRCM, PXLW, TSRA, LSI
Network Products: APKT, BRCD, CSCO, JNPR
Telco: ANEN, CIEN, TSYS, CLWR, CMCSA, FNSR, S, VZ, DISCA

Components: SANM, WFR, ROVI
Media: RGC, DTV, DISCA, DIS, THQI

Research Away

Upgrades:

AVID to overweight at JPM

ONNN to outperform at Wedbush

ARRS to buy at Collins Stewart

Downgrades:

CSCO to hold at ISI Group

SOHU to hold at DB

DTV to outperform at Macquarie

CSCO to neutral at MKM Partners

WXS to neutral at Janney Capital

ERICB SS to neutral at Swedbank

Initiations:

AAPL buy at Mizuho

DELL buy at Mizuho

HPQ neutral at Mizuho

Mentions:

AAPL target increased at Canaccord

Cantor Research

Cantor/TQNT: 4Q11; Slightly Better; Still a 2H12 or 2013 Story: HOLD

· TriQuint reported a 4Q:11 that was slightly better than expectations and an outlook that was slightly below

· However, gross margins of 29.5% were well below our estimate of 31%, and were down 540 bps sequentially and down 9.5 full percentage points from last year. Furthermore, the company guided to flattish margins in 1Q:12 and said they would need a strong uptick in networking revenues to move margins back toward 40% range

· In spite of iPhone revenues increasing to 41% of total, the company continued to caution that they do not expect growth to return until 2H:12. We are more cautious and are concerned that the company has lost significant market share that could persist until next year.

https://cantor2.bluematrix.com/docs/pdf/e125ba88-bea8-4d42-be30-ecc1e31f5034.pdf

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